SHANGHAI: China and Hong Kong stocks closed down on Thursday, tracking regional markets lower as investors digested the implications of policymakers in major economies preferring to take a patient approach to monetary easing amid sticky inflation.

Geopolitical tensions also kept investors nervous as China’s military started two days of “punishment” drills held in five areas around Taiwan just days after Taiwan President Lai Ching-te took office.

More hawkish-than-expected minutes of the Federal Reserve’s latest policy meeting, a hot UK inflation print and a sobering assessment of New Zealand’s inflation problems from the country’s central bank have caused investors to pare their bets of the pace and scale of global rate cuts expected this year.

China’s central bank has guided some commercial banks to accelerate the pace of lending in May, four sources with knowledge of the matter said, after broad credit growth in April hit a record low.

At the close, the Shanghai Composite index was down 1.33% at 3,116.39.

The Hang Seng index was down 326.89 points or 1.7% at 18,868.71. The Hang Seng China Enterprises index fell 1.7% to 6,701.78.

The blue-chip CSI300 index was down 1.16%, with its financial sector sub-index lower by 1.09%, the consumer staples sector down 0.8%, the real estate index down 1.71% and the healthcare sub-index down 1.04%.

The smaller Shenzhen index ended down 1.72% and the start-up board ChiNext Composite index was weaker by 1.377%.

The sub-index of the Hang Seng tracking energy shares rose 0.3%, while the IT sector dipped 2.02%, the financial sector ended 1.33% lower and the property sector dipped 1.95%.